The coronavirus is injecting an unhealthy dose of pessimism into market experts forecasting lesser growth in the first quarter of 2020, but that doesn’t seem to be stopping investors. Despite the outbreak, the risk-on sentiment in this extended bull rally persists and this could be a good or bad thing depending on who you ask.
According to a CNBC report, a “CNBC survey of 11 forecasters over the weekend finds first-quarter GDP estimates averaging just 1.2%, down nearly a point from the fourth quarter. Economists see a bounce back to 2% growth in the second quarter, depending on the severity of the virus both in China and in other countries.”
The equity markets continue to roar, however, with the Nasdaq Composite hitting a record high in Monday’s trading session. The bond markets, however, are taking an opposite perspective—with the yield on the 10-year Treasury note off 37 points since the start of 2020, this is triggering a warning.
“Rate markets are sending warning signs, creating renewed disconnect between rate and equity markets,” JPMorgan said in a report. “What we find complacent is the idea among some market participants that Chinese economic weakness will have limited repercussions for the rest of the world.”
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With U.S. equities successfully parrying the effects of the coronavirus as of late, this all this creates an opportunity for investors to capitalize on the Direxion FTSE Russell US Over International ETF (NYSEArca: RWUI).